Title: False EconomyA Surprising Economic History of the WorldAuthor: Alan BeattiePublisher: Riverhead Books(c) 2009 New York

ISBN 978-1-59448-866-5Author description on Jacket:Begin Quotation:Alan Beattie graduated from Balliol College, Oxford, with a degree in history. After taking a master's degree in economics at Cambridge, he worked as an economist at the Bank of England and the then joined the Financial Times in 1998. Currently the paper's world trade editor, he writes about economics, globalization, and development.End Quotation.

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Last edited by tahanson43206 on Sun Dec 10, 2017 2:18 pm, edited 41 times in total.

May every member of The Knowledge forum grow financially, intellectually, socially and beyond.

Taking 1776 as a focal point for Smith's discourse, is is 240 years to the current date, of 2016.

Recognizing that the present undertaking is quite probably overly ambitious, my concept is to compare and contrast Smith's observations with mine 240 years later, AND to attempt to envision principles and practices that may influence human activity going forward. Because I believe that it is both imperative and inevitable that humans will explore the galaxy and settle wherever possible, I will attempt to understand how Smith's observations might apply away from Earth.

Chapter I presents Smith's observations about the efficacy of the Division of Labor, to increase the productivity of a society. Over the past 240 years, we have seen countless examples of the increasingly efficient application of the principles, through the factories that manufacture cell phones in China and numerous other counties today.

In my opinion, we will see less and less of such mindless human activity, as automation continues to take on the duties humans have assumed in response to the demands of the Division of Labor.

In many locations on Earth in 2016, home owners and apartment dwellers enjoy the benefits of automation which allow them to live more comfortably and securely than the grandest ruler of ancient or even comparatively recent times.

At the time Smith was writing, slavery of human beings allowed the ruling class to enjoy the benefits automation provides to average persons today.

Slavery still exists on Earth in 2016. I expect to see it reduced in extent and severity over time, as automation extends to fully ambulatory and articulated human equivalent electromechanical systems.

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May every member of The Knowledge forum grow financially, intellectually, socially and beyond.

It is widely reported (as anecdotal evidence) that in 2016, American workers will not accept menial work. These reports arise in the context of a dispute about the presence of 'undocumented workers', who WILL accept work as laborers in farm fields.

Manufacturing jobs which Adam Smith would recognize as expressions of the Division of Labour have moved out of America in great numbers, to lands where workers are still willing to accept the mindless nature of the employment, in return for wages those workers still find acceptable.

Adam Smith himself would be characterized as a “knowledge worker”. He is reported to have served as a professor in at least two roles, and he certainly achieved measurable output as a writer.

In the United States of 2016, and in many other nations, the occupation of “knowledge worker” has increased in scope compared to manual labor.

Estimates vary, so for the purposes of this post, I will simply note that while the number of manual workers is decreasing with respect to the population as a whole, the number of “knowledge workers” is increasing.

As I look out at the world of 2016, I think it is reasonable for any worker to feel that a mindless manual job that can be done by a machine SHOULD be done by a machine.

Where I hope to end up over the course of these weekly ruminations is with a conclusion that the global economy of the planet Earth of 2016 can support a class of professional consumers, so that no one born into this economy need lack for an income sufficient to support a comfortable life.

The search for meaning of life can then arise out of the fog of mere survival.

Thus, it would be my hope that it will turn out that the vast majority of human beings would prefer to engage in activity which seems to them meaningful, if they are freed from the day to day burden of the Division of Labour to merely survive.

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May every member of The Knowledge forum grow financially, intellectually, socially and beyond.

The extent to which these activities have found their way to underpinning the Internet economy, and the newspaper/magazine economy previously, might have surprised Smith.

Never-the-less, clearly the title of this chapter shows Smith's awareness of the importance of “the market” to an economy.

As the 2016 presidential election lumbers forward in the United States, the frustration of millions of persons who are NOT enjoying the fruits of the Division of Labour (or in may cases, ANY labour), is forcing grudging recognition on the part of those who are better off. The mechanism for this communication is the ballot, which allows an individual to select from a range of candidates for office in order to force an otherwise uncaring general population to take notice.

In this chapter, Smith points out the positive influence of water ways upon the growth of flows of goods between communities in the ancient world.

In a future not far distant from today, flows of communication will be entirely digital, as communities in locations remote from Earth send and receive instructions for manufacture of non-biological and biological structures.

It seems to me that the roles of marketing and sales will continue to grow in importance, to include not only the local opportunities, but distant communities as well, who will be challenged to produce value in digital form sufficient to persuade other communities to exchange with them.

Where I hope to end up over the course of these weekly ruminations is with a conclusion that the economy of the planet Earth of 2016 can support a class of distant communities with digital communications reflecting the greater variety of capability of the larger population, while at the same time providing a large and ready market for digital communications from the smaller populations, who may yet offer insights or achievements not occurring elsewhere.

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May every member of The Knowledge forum grow financially, intellectually, socially and beyond.

The concept of “fiat” money does not appear in the index of “The Wealth of Nations”

The extent to which money has become disassociated from particular commodities in 2016, might have surprised Smith. He reviews the history of representation of “value” over centuries, and considers the use of commodity backed money in his day.

As we look forward towards growth of communities away from Earth, I see two possible directions which people might take, or perhaps three as the phenomenon of Bitcoin like services continue to develop. The first and (perhaps) most likely that the fruit of thousands of years of trial and error will be embraced, and the modern “basket of commodities and services” based fiat money will prevail.

The second (and certainly likely) alternative will be to ignore history and attempt to set up a commodity based monetary system, taking into account the relative abundances of materials in the community environment, and the relative “value” of those commodities.

The third alternative is to simply jump to a Bitcoin like exchange mechanism.

On Earth in 2016, a small nation in Europe has undertaken an experiment to accept payment of governmental fees in Bitcoin. Since this is considered an experiment, payment of taxes is excluded from the options available.

Where I hope to end up over the course of these weekly ruminations is with a conclusion that the economy of the planet Earth of 2016 can support a class of distant communities with digital communications reflecting the greater variety of capability of the larger population, while at the same time providing a large and ready market for digital communications from the smaller populations, who may yet offer insights or achievements not occurring elsewhere.

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May every member of The Knowledge forum grow financially, intellectually, socially and beyond.

2016/05/21 knowledge ForumThread: Adam Smith “The Wealth of Nations”Book 1 Chapter 5 “Of the Real and Nominal Price of commodities, or of their price in labour and their price in money”

In this chapter, Smith allocates a significant discussion to the history and relative merits of various kinds of money, with particular emphasis on metal. From the perspective of 240 years later, at a time when the entire issue of commodity backing for money has been eliminated as a concern, the author's careful exposition seems quaint. However, this chapter helps to remind today's reader of the nagging concerns of a former time, and to solidify understanding of the benefits of today's hard won practices.

Where I hope to end up over the course of these weekly ruminations is with a conclusion that the economy of the planet Earth of 2016 can support a class of distant communities with digital communications reflecting the greater variety of capability of the larger population, while at the same time providing a large and ready market for digital communications from the smaller populations, who may yet offer insights or achievements not occurring elsewhere.

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May every member of The Knowledge forum grow financially, intellectually, socially and beyond.

In this chapter, Smith develops and supports his argument that price is composed of wages, rent and profit. For my purpose, in seeking to understand whether the global economy of 2016 can support persons who are NOT employed in direct provision of goods or services needed for survival, I find Smith's concluding paragraph of interest. Specifically:

Begin quotation:But there is no country in which the whole annual produce is employed in maintaining the industrious.End Quotation.

I am wondering if the level of physical technology, on one hand, and the level of social “technology” on the other, may have reached a point envisioned by more than one science fiction writer, wherein persons may be legally and “gainfully” employed as consumers.

As I look out at the economy of the United States in 2016, and beyond to as much as I can “see” of the rest of the world, I ** think ** I am seeing the majority of “jobs” are NOT related directly to provision of essential needs.

Where I hope to end up over the course of these weekly ruminations is with a conclusion that the economy of the planet Earth of 2016 can support a class of distant communities with digital communications reflecting the greater variety of capability of the larger population, while at the same time providing a large and ready market for digital communications from the smaller populations, who may yet offer insights or achievements not occurring elsewhere.

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May every member of The Knowledge forum grow financially, intellectually, socially and beyond.

In this chapter, Smith develops and supports his argument that price is set by the market, but that price will tend toward the “natural” price for any commodity. Thus, while a commodity is scarce, the seller can wait for buyers to compete with each other so that the price is higher than the “natural” value.

Likewise, when a commodity is in greater supply than the demand requires, the seller may choose to reduce the price in hopes of attracting bargain hunters who would shy away from the “natural” price, and certainly from the elevated price of the competitive case.

However, in both cases, the price will tend toward the “natural” price, where supply meets demand.

This chapter includes a passage I find enjoyable, because I can certainly relate to the very poor man who may have a “demand for a coach and six”. Over the two hundred years since Smith penned these lines, it seems to me we humans have striven mightily to bring about a state of affairs such that even “a very poor man” can afford the modern equivalent of a “coach and six”.

Smith was considering the difference between an “effectual” demand, and an “absolute” demand.

In the tumult of presidential election politics in the United States of 2016, I think I can discern an abundance of “absolute” demand that would be converted by clever politicians to “effective” demand, if they have the wits to bring that about.

News has just crossed the wires to the effect that the people of Switzerland have defeated a proposal to give every citizen a basic income. I am disappointed because I would have liked to have seen a serious attempt to implement this idea. As automation continues to assume more responsibility for providing the goods and services humans need, it seems to me we have an opportunity to change from a fear driven economy to one based upon passion.

Yet, the basics of economics will remain in effect as automation progresses, because there will be owners of the means of production, and there will be those who are not owners but who need the results of production to live at all, let alone to live comfortably.

Later in Chapter 7, Smith takes up monopoly once again, as a practice he finds disagreeable.

As we head into a future with increasing automation providing goods and services to meet the needs of the still growing global population, competition remains the single most powerful force to keep prices near to their “natural” values.

Where I hope to end up over the course of these weekly ruminations is with a conclusion that the economy of the planet Earth of 2016 can support a class of distant communities with digital communications reflecting the greater variety of capability of the larger population, while at the same time providing a large and ready market for digital communications from the smaller populations, who may yet offer insights or achievements not occurring elsewhere.

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May every member of The Knowledge forum grow financially, intellectually, socially and beyond.

In this chapter, Smith develops and supports a lengthy and detailed discussion of the history of labour to his time and the state of affairs in his time, with numerous examples from around the world.

With the advantage of 240 years of change since Mr. Smith documented his environment, I note that there is a change in the attitude of the population toward moderation of the pool of workers by famine, at least in the wealthier nations with functioning governments. Mr. Smith's report of massive die-offs of desperately poor people seem matter-of-fact and quite ordinary.

240 years later, in the United States and most European nations, excess workers are generally supplied with minimal accommodation. In the United States, however, I observe that unemployed persons are criticized by some persons of an ideological bent for failing to earn their keep.

This is an interesting change from Smith's time, when (I gather) such persons were routinely allowed to starve, and what is more, the members of the starving population apparently meekly went along with this state of affairs as quite normal.

There exists today, a person who writes for living, by composing articles reflecting a particular ideology. In a recent piece, this writer decried the pampering of unemployed persons with benefits they have not earned, and insisted these benefits would weaken the resolve of the beneficiaries.

Had this writer lived in Smith's time, the remedy for unemployment would have been starvation. I cannot help but wonder if the writer would have praised the practical remedy of Smith's time, as a reasonable solution to the indolence of the unemployed.

In the closing pages of this chapter, Smith considers the effects of lean (dear) years as compared to plentiful years, on the relationship between “masters” and “workers”. In 2016, concerns are less about harvest performance, and more about the distribution of production in the global economy.

As China has proven mastery of modern manufacturing techniques, and perhaps more importantly, mastery of modern marketing and sales techniques, manufacturers in the United States have beguiled themselves with the perceived advantage of low cost production away from the United States.

In Smith's day, the workers thus left without employment would have been (I gather) allowed to starve, and what is more, they would (apparently) have meekly accepted that fate.

In the current age, these displaced workers have not only refused to die, but they have banded together to try to elect a (potential) despot to a position as leader of the United States, and thus of the entire world. I see this situation as further evidence that there are already more persons available to do work (labour) than there are positions to be filled, while the economy taken as a whole has more than enough capacity to meet the needs of the global population.

Where I hope to end up over the course of these weekly ruminations is with a conclusion that the economy of the planet Earth of 2016 can support a class of distant communities with digital communications reflecting the greater variety of capability of the larger population, while at the same time providing a large and ready market for digital communications from the smaller populations, who may yet offer insights or achievements not occurring elsewhere.

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May every member of The Knowledge forum grow financially, intellectually, socially and beyond.

In this chapter, Smith announces at the outset that is difficult if not impossible to make judgments about the amount of profit that might have been realized in the past, and even trying to assess profit in his time was difficult. He then goes on to try to make an argument that there might be a direct correlation between interest rates and the amount of profit, but I find this discussion dissatisfying because 240 years later, profits appear to have almost nothing to do with interest rates, which have remained near zero for eight years, while corporate profits have been healthy.

However, at one point, Smith describes the people of Holland as unusually industrious, and asserts that almost everyone is a business person, and anyone who is idle is looked down upon. This condition is ascribed (in a footnote) to the relative scarcity of valuable land.

In this chapter, Smith continues commentary upon the conditions that prevail in the English colonies of North America, where an abundance of land leads to a lack of labour with respect to the need, and to higher wages. In the present age, I wonder if there is a feature of the environment that is similar to land in Smith's day, in the sense that unlimited opportunity exists for those who recognize it, and who have the talent and leadership skill to develop it.

Bill Gates certainly did not depend upon “land” to achieve one of the greatest fortunes known to human kind. He did, however, depend upon the availability of space to work, and tools appropriate to the visions he developed. It seems to me that Gates recognized a need that he might be able to meet, and rallied the people (both co-workers and customers) to realize the vision.

Perhaps there is a translation between the physical land of Smith's day, and the digital environment of today's world. Thus, the Bill Gates or many others who toil in the “field” of digital technology may be comparable to the farmers of Smith's day.

I wonder what Smith would have made of software as a 'product' that costs almost nothing to distribute, but thanks to the legal structure of the United States, is sold for whatever the market will bear, and thus pays the wages of the workers, and provides for magnificent distributions to stock holders.

Where I hope to end up over the course of these weekly ruminations is with a conclusion that the economy of the planet Earth of 2016 can support a class of distant communities with digital communications reflecting the greater variety of capability of the larger population, while at the same time providing a large and ready market for digital communications from the smaller populations, who may yet offer insights or achievements not occurring elsewhere.

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May every member of The Knowledge forum grow financially, intellectually, socially and beyond.